City Council approves ordinance for a long-term Waste Heat-to-Energy contract

SEATTLE – As a result of today’s Seattle City Council vote approving an ordinance to allow Seattle City Light to enter into an innovative energy conservation contract with its largest customer, Nucor Steel, enough energy will be saved to heat 540 Seattle homes for a year. The project will turn Nucor’s waste heat from manufacturing processes into energy, resulting in 5,000 megawatt-hours of energy being recovered.

“Seattle City Light and Nucor have stepped up and aggressively pursued an opportunity to take an innovative approach to energy efficiency,” said Mike O’Brien, chair of the City Council Energy & Environment Committee. The utility and its largest customer, Nucor are showing leadership under the requirements of I-937.”

In 2006, Washington State residents passed the Washington Energy Independence Act, I-937 requiring utilities with more than 25,000 customers to acquire 15 percent of their energy needs through new renewable energy sources by the year 2020. Utilities also are required to achieve all available cost effective energy conservation measures. In 2012, the state Legislature amended I-937 to create a pre-approval process for customer-owned utilities such as Seattle City Light wanting to pursue innovative energy conservation measures and renewable resources.

Nucor processes scrap steel to make reinforcing bar for the construction industry. In the spring of 2012 Nucor submitted a proposal for a waste heat-to-energy project to the Washington State Department of Commerce for pre-approval. Recovering waste heat from manufacturing processes is considered a high efficiency cogeneration effort that counts as energy conservation. In July 2012 the Department of Commerce issued a positive opinion on the proposal. Pre-approval was critical to the utility by removing uncertainty about whether the proposal would qualify under I-937.

“Seattle City Light has a 35-year history of supporting customers in their efforts to achieve energy savings and cost savings,” added Seattle City Light Superintendent Jorge Carrasco. “The state’s pre-approval and the Council’s ordinance are significant, giving both Nucor and City Light certainty under the provisions of I-937.”

Today’s Council vote adopts the Department of Commerce’s advisory opinion and gives City Light the authority to enter into a long-term agreement with Nucor. It gives Nucor the certainty it needs to negotiate engineering and equipment contracts with vendors.

The key terms of the agreement include the purchasing of energy savings and the environmental attributes for the project and a 2 cents per kilowatt-hour incentive based on the power produced by the project over the 12-year term of the contract. In order to protect City Light’s risk, Nucor will be required to repay any portion of the financial incentives if the project is permanently shut down during the 12-year life of the contract.

This first of its kind pre-approval conservation project marks an innovative and cost-effective clean energy resource for the utility that includes environmental benefits such as reducing carbon emissions. It also will help the utility meet its goals under I-937. The project is anticipated to come online in 2014 if Nucor is able to successfully negotiate vendor contracts.

Seattle City Light is the 10th largest public electric utility in the United States. It has some of the lowest cost customer rates of any urban utility, providing reliable, renewable and environmentally responsible power to nearly 1 million Seattle area residents. City Light has been greenhouse gas neutral since 2005, the first electric utility in the nation to achieve that distinction.

Nucor steel is the largest manufacturer of steel products in North America with 50 locations in the United States.